Estate Planning and Trusts Blog

Time to Take Over A Parent’s Finances?

Determining whether it's time to take over a parent's finances can be tricky.
Determining whether it’s time to take over a parent’s finances can be tricky.

When is it time to take over a parent’s finances? The realization that parents can no longer be entrusted with their own finances often comes on the heels of the decision to take away the car. This is a very difficult issue because the parents of Baby Boomer kids are the “Greatest Generation.” As a general rule, they were and are extremely private about finances. The steps to take are outlined in this article, “Here’s how to know when it’s time to take control of your parent’s finances,” from Considerable.

The tricky part is figuring out the timing. If it is done too soon, you’ll be battling with your parents. Conversely, if it is done too late, major financial damage may be done.

Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Other clues that it may be time to take over a parent’s finances: purchasing things they never bought before, or paperwork piling up on a desk that used to be tidy and organized.

One adult daughter didn’t realize that her mother was being scammed until Mom had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers – including family members!

One elderly woman, suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she didn’t understand the importance of those notices. (Many insurance companies now request a back-up contact person who can be notified if a payment is missed).

Even children who have close relationships with their parents can miss the signs. Often, the children don’t step in until the parent has a health crisis, and, at that point it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of his or her spouse, an otherwise organized parent may become prone to making mistakes.

The earlier children can become involved, the better. Children should ideally become involved with their parents while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances. Sadly, even with well-drafted estate planning documents, a guardianship court may have to become involved if the parent is not willing to let the children help.

An elder law attorney will be able to help the family as they transition the parents away from being in charge of their own finances. It’s not always an easy process but sometimes it’s necessary.

Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”

Other articles you may find interesting:

Using a Power of Attorney for a Parent

Financial Advisors Try to Prevent Financial Exploitation

Medicaid and Estate Planning Documents

medicaid and estate planning
Medicaid for payment of long-term care is becoming a factor in many estate plans.

The conversation that you have with an estate planning attorney when you’re in your thirties – with a new house, young children, and many years ahead of you – is different than the one you’ll have when you are much older, maybe just before you retire. The estate planning attorney will know that you are about to enter a time in your life when the legal documents you prepare are more likely to be used, says the article “Learn about legal documents and Medicaid” from the Houston Chronicle.

It should be noted that everyone needs an estate plan at any time of life so they can state their wishes for how assets are distributed and also name a person who will speak on their behalf in the event of incapacity because of an illness or injury.

So an estate plan should include a Durable Power of Attorney, which names someone you chose to serve as your agent to transact business and handle your financial matters. There should also be a Declaration of Preneed Guardian, in the event of later incapacity, and a HIPAA medical authorization document. In some instances, a designation of remains is prepared in order to name an individual who will be the appointed agent to care for the body at the time of death.

However, there’s another reason why you’ll need to meet with an attorney later in life. As we get older, the need to address long term care becomes more important. Medicaid eligibility may be part of that plan. Making the right decisions now could have a big impact on the quality of your retirement and your medical care.

If you haven’t updated your Will or your Powers of Attorney, it would be wise to do so now. You’ll need a document to clearly authorize your agent to deal with assets. If your documents are out of date, or named agents have predeceased you, it may not be effective, which could lead to problems for you and your heirs.

The document may also need to include a broad gifting power for your named agent, so assets can be transferred out of the estate. If this detail is overlooked, your agent may not be able to protect your assets.

This is also the time when you may want to take steps to protect your children upon your death or upon the death of the second parent. If your goal is to arrange your assets to be eligible for Medicaid coverage, this planning should be done well in advance. Many states pursue recovery of assets when a person has received Medicaid benefits, so it needs to be done correctly.

Your attorney will be able to work with you and your family to address your specific situation. It may mean that your estate plan will include trusts, or that certain assets will need to be retitled. Meet with an estate planning attorney who is familiar with your state’s laws. And don’t procrastinate.

Reference: The Houston Chronicle (April 19, 2019) “Learn about legal documents and Medicaid”

Other articles you may find interesting:

A Health Care Surrogate’s Powers

Yes, You Should Have a Will

Prince’s Estate Battle Drags On

Prince's estate is bleeding money
Prince’s estate is bleeding money because he never created an estate plan.

Three years later and Prince’s estate remains as unsettled as it was on the day he died in his beloved Paisley Park mansion, located just outside of Minneapolis, says the New York Post’s Page Six in the article “Fight over Prince’s $200 M estate could go on for years.”

The estate, which includes a 10,000 square foot Caribbean villa in addition to Paisley Park and master tapes of his recordings, has been estimated by some to be worth in the neighborhood of $200 million. But what will be left after all the battles between heirs and the consultants (whose fees are adding up)?

The heirs are now in a court battle with the estate’s administrator, which has already blown through $45 million in administrative expenses. That’s from a probate-court petition filed by Prince’s heirs. They’ve asked the court for a transition plan and a new administrator, which is scheduled for the end of June.

One observer noted that Prince’s estate may take decades to resolve – all because there was no Will.

So a judge had to determine who Prince’s heirs were. More than 45 people stepped up to claim inheritance rights when the Purple One died in 2016. Some said they were wives, others said they were siblings and one said he was the artist’s son. DNA testing debunked that claim.

The list of heirs has been narrowed down to six: his full sister, Tyka Nelson, and half siblings Norrine Nelson, Sharon Nelson, John Nelson, Alfred Jackson and Omarr Baker.

Until fairly recently, the heirs were divided and quarrelling among themselves. For now, they have come together to challenge the court appointed bank, Comerica, that became the estate’s administrator. They don’t agree with Comerica’s cash flow projections, accounting, or inventory of Prince’s estate assets. They also claim that Comerica is not being responsive to their concerns and that Comerica is the reason that Prince’s estate is $31 million behind on estate taxes.

The company stated that it was the best possible administrator of the estate and insisted it is making all tax payments necessary to settle the estate.

Everyone needs to have at least a Will (even with a small estate), so that heirs are not left battling over assets. While Prince may have thought of himself as too young to die, a Will and a plan for his estate would have preserved his assets for his heirs and let him determine what happened to his music and his artistic legacy.

Reference: New York Post’s Page Six (April 19, 2019) “Fight over Prince’s $200 M estate could go on for years.”

Other articles you may find interesting:

Tom Petty’s Heirs Battle Over His Estate

Angelina Jolie Leaving Her Estate to One Child?

A Health Care Surrogate’s Powers

Man in hospital bed needs a health care surrogate
A Health Care Surrogate makes medical decisions for you when you cannot.

Many people don’t really understand how a Florida Designation of Health Care Surrogate document works, so I thought I’d try to explain.

First, what we in Florida call a Designation of Health Care Surrogate, many other states call a Health Care Power of Attorney. It’s a legal document executed by a mentally competent adult (the “Principal”) which names one or more people to make health care decisions for her when she can’t (the “Surrogate” or “Agent”). When would she need her Surrogate to make such decisions for her? When she’s unconscious, heavily medicated, or not mentally competent at the time the decisions are needed.

Florida has a public policy when it comes to Health Care Surrogates – no Surrogate can override a decision made by a Principal who has mental capacity. In other words, a Principal capable of making informed medical decisions can veto her Surrogate. A physical disability, such as a vision or hearing impairment or loss, doesn’t negate that policy; if the Principal is conscious, can understand what’s going on, can make an informed decision, and can communicate that decision in some way (even by blinking her eyes), her decision controls. Always. But, if she chooses not to make the decision and instead defers to her Surrogate’s decision, that’s okay as long as her Health Care Surrogate document says it is.

Without a written Health Care Surrogate document, a Surrogate authorized under the Florida statute would only be consulted after a doctor decided the Principal lacked the capacity to make decisions. With the written document, the Principal has the option to defer to the Surrogate at any time – whether the doctor thinks she’s incapacitated or not.

That’s why the document usually says something along the lines of: “While I have decision-making capacity, my wishes are controlling…” That’s the default under Florida law – a doctor has to put down in writing that the Principal is unable to make informed decisions before the Surrogate has any power at all. But the Principal who is executing a Health Care Surrogate document has the option, by initialing in another area on the document, to allow her Surrogate to act immediately – without the need for a doctor to say the Principal can’t make decisions.

Every state has different policies and documents regarding health care decisions and Living Wills. In Florida, autonomy and independence take priority when it’s at all possible. So Health Care Surrogates serve in addition to the person who named them – they don’t replace them. Therefore, these documents work well only when everyone is playing nicely. In Florida, the only way for a Surrogate to completely control all medical decisions for a Principal is by petitioning a court for guardianship (voluntary or involuntary), which completely removes the legal right of the Principal to make her own medical decisions.

Other articles you may find interesting:

Why Unmarried Couples Need Estate Planning

Widowed? What Happens Next?

Naming a Child as Successor Trustee?

Children as successor trustees may fight
Naming a child as Successor Trustee isn’t always the best choice for family harmony.

So, you’re creating or changing a revocable living trust, and you tell your estate planning attorney that you wish to name your child as Successor Trustee.

Your Successor Trustee is the person who will step in to handle your trust assets when you become incapacitated or die. You have three children who all get along famously. Should you name one of them as your Successor Trustee?

No.

Okay, maybe that’s an overly-simplified answer. I’ll change it to “probably not.” Naming one of your children as Successor Trustee almost always results in conflict and may end up tearing your family apart.

One child as Successor Trustee

There are occasions when putting one child in charge of the money and property that their siblings will receive works out well and everyone stays friendly. Generally, in these cases the siblings

  • were all the product of the same long-term marriage,
  • were all very close before their parent’s death,
  • were all aware of the parent’s estate plan before the death,
  • were all similarly situated financially before the inheritance,
  • lived close enough to each other to split any sentimental items among themselves while all siblings were present,
  • pretty much equally shared the burden of care-taking for the deceased parent,
  • had no addiction or gambling problems in their families,
  • didn’t allow their spouses or adult children to have a say in the probate or trust administration process, and
  • the Successor Trustee’s only job was settling the estate and dividing up the assets equally for immediate outright distribution to all the siblings.

If this sounds like your situation, then naming your child as Successor Trustee may work out just fine.

Multiple children as Co-Successor Trustees

Some folks think naming all or a couple of their children as Co-Successor Trustees will prevent conflict. It won’t. In fact, it can even be worse than naming only one child as Successor Trustee because now two or more people have to agree on everything and sign all the necessary paperwork. Banks and financial institutions hate co-anythings because all it does is slow down any process and open the door for conflicts and lawsuits.

So what’s the solution?

Name a disinterested party. Someone who has no skin in the game. Someone who has no close personal relationships with any one child and will not be inheriting anything from you. It can be a friend, your sibling, your accountant or estate planning attorney, or other professional fiduciary. If your trust will last more than a few years, consider naming a bank or trust company.

What was that? You don’t want to pay someone to manage your trust? Seriously? You’d rather tear your family apart and have litigation attorneys receive the bulk of your children’s inheritance? You can certainly make that choice.

Whatever you decide to do, TALK TO YOUR FAMILY! Explain why you’re naming one child as Successor Trustee, or leaving more money to the caretaker child, or appointing a disinterested party, or disinheriting a child or grandchild. If you’re not comfortable doing it by yourself, ask your estate planning attorney to help you arrange a family meeting in person or by teleconference. It’s not an easy conversation, but it just may keep your family together after you’re gone.

Financial Advisors Try to Prevent Financial Exploitation

Financial advisors try to prevent financial exploitation
Financial advisors try to prevent scammers and even family members from stealing their senior clients’ money.

The next time you see your financial advisor, you may be asked to provide a trusted point of contact, such as a relative or friend, for the advisor to call if he has a reasonable belief that you might be a victim of financial exploitation.

Kiplinger’s recent article, “New Rules Battle Financial Scams, Elder Abuse” says that your adviser could place a temporary hold on a suspicious disbursement request from you, so your money is protected until the concern is investigated. When money leaves an account, it’s hard to get it back.

Changes include several new laws that protect seniors and their money. For older adults, financial exploitation is a growing problem. One in five older Americans are the victim of financial exploitation each year, resulting in the loss of $3 billion annually.

Mild cognitive impairment can result in older adults not seeing red flags for fraud, says Michael Pieciak, president of the North American Securities Administrators Association (NASAA), which represents state securities regulators. The ability to judge risk may be diminished. He noted that social isolation plays a part, with vulnerable seniors home during the day and apt to answer the phone when a fraudster calls.

Federal and state lawmakers, along with the financial services industry, have initiated new rules to help safeguard seniors and their assets. The idea is that financial institutions and professionals are on the front lines when it comes to spotting elder financial abuse. The changes are designed to protect seniors and to shield financial professionals from liability for reporting possible exploitation.

Congress passed the Senior Safe Act in 2018. This law protects financial services professionals from being sued over privacy and other violations for reporting suspected elder financial abuse to law enforcement, provided they’ve been trained. If a bank teller notices that a senior seems confused about withdrawing money or is making puzzling transactions, the teller could tell a superior, who could contact authorities, if necessary.

Nineteen states have enacted some version of a NASAA model act that provides registered investment advisers and broker-dealers with guidance on telling a trusted point of contact and putting a temporary hold on a client’s account to investigate financial fraud.

Reference: Kiplinger (April 3, 2019) “New Rules Battle Financial Scams, Elder Abuse”

Using a Power of Attorney for a Parent

power of attorney
A Power of Attorney is the most important estate planning document your parent should have.

Does your parent have a Power of Attorney? Do you have a copy?

Imagine that your perfectly fine, aging-well parent has had a minor stroke and is no longer able to manage her financial or legal affairs. Your parent has been living independently, waving off offers of help or even having someone come in to clean for years. It seemed as if it would go on that way forever. What happens, asks the Daily Times, when you are confronted with this scenario in the aptly-titled article “Senior Life: What a nightmare! Untangling a loved one’s finances”?

After the health crisis is over, it’s time to get busy. Open the door to the home and start looking. Where’s the original Will? Where are the bank statements and where’s the information about Social Security benefits? When you start making calls or going online, you may run into a bigger problem than figuring out where the papers are kept – no one will talk with you. You are not legally authorized, even though you are a direct descendant.

This happens all the time.

Statistically speaking, it is extremely likely that your parent will end up, at some point, in a nursing home or a rehabilitation center for an extended period of time. Most people have no idea what their parent’s financial situation is. They don’t know where and how Dad keeps his financial and legal records or what they would need to do to help him in an emergency.

It’s not that difficult to fix, but you and your healthy parent or parents need to start by planning for the future. That means sitting down with an estate planning attorney and making sure to have some key documents executed – especially a Power of Attorney.

A Power of Attorney (POA) is a legal document that gives you permission to act on another person’s behalf as their agent, if they are unable to do so. It must be properly prepared in accordance with your state’s laws.  It allows you to pay bills and make decisions on behalf of a loved one while they are alive. Without it, you’ll need to go to court to be appointed as legal guardian. That takes time and is much more expensive than having a POA created and properly executed.

If you’ve downloaded a Power of Attorney and are hoping it works, be warned: chances are good it won’t. Many financial institutions are very picky about the POAs they’ll accept, and most generic forms won’t have many of the special provisions estate planning and elder law attorneys know need to be included to allow you to have certain powers in place to help your parent.

If your parent has a POA in place, and you have to step in, then it’s time to get organized. You’ll need to go through your parent’s important papers, setting up a system so you’ll be able to see what bills need to be paid and how many bank accounts or investment accounts exist.

Next, it’s time to consolidate. If your parent was a child of the Depression, chances are she has money in many different places. This gave her a sense of security but it’ll give you a headache! Consolidate multiple CDs, bank accounts, and investment accounts into one institution. Have Social Security and any pension checks deposited into one account.

If you need help, don’t hesitate to ask for it. The stress of organizing a loved one’s home, caring for him or her, and managing the winding down of a home can be overwhelming. Your estate planning attorney will be able to connect you with a number of resources in your area.

Reference: Daily Times (April 9, 2019) “Senior Life: What a nightmare! Untangling a loved one’s finances”

IRS Scams: What You Need to Know

IRS scams
IRS scams are carried out by con artists who prey on the elderly.

IRS scams seem to be getting more common. The other day I spoke with a sweet elderly client who had received a voicemail message from a man who claimed he was from the IRS. He told her they’d be issuing a warrant for her arrest if she didn’t call them back immediately. Of course, that frightened her and she called the number he left. Luckily, she was a bit wary and when the person on the other end told her to buy some Google Play gift cards as payment, she was pretty sure it was a scam and hung up. But she called me for reassurance that she’d done the right thing (she had).

The creepy thing is that while I was on the phone reassuring my client, my paralegal received a recorded IRS scam message on her cell phone! And I seem to get at least one recorded voicemail per month claiming there’s a warrant out for my arrest due to nonpayment of taxes.

It’s almost an epidemic. You get a phone call or robotic-sounding message from someone who says he is from the Internal Revenue Service (IRS). He says that you owe money for taxes and that the authorities will come and arrest you unless you wire money or buy prepaid debit cards, Google Play gift cards, or iTunes gift cards immediately. Of course, the caller isn’t with the IRS. He’s a thief.

These IRS scam artists target older Americans  – even those in nursing homes – and bilk them out of millions of dollars a year. Here’s what you need to know about these IRS scams…

The government has hard numbers only for the people who reported the theft to the Treasury Inspector General for Tax Administration (TIGTA), so the total scope of the crimes is likely much larger than the numbers make it appear. Since late 2013, more than 15,000 people have reported losses totaling nearly $75,000,000 to these illegal IRS scams. The average amount stolen is nearly $5,000 per victim, but at least one person lost more than $500,000, and at least one other person committed suicide after realizing he had been conned.

Thankfully, the word is getting out about these IRS scams, and would-be victims are reporting the impersonators. More than 2,500,000 people have contacted TIGTA to report suspicious calls from people claiming to be with the IRS.

What to Do If You Get a Suspicious Phone Call

If you get a phone call from someone who claims to be an IRS employee, just hang up. TIGTA agents advise that you not engage with the person at all. Don’t try to pull a prank on him or blow an air horn into the phone. Just get off the phone immediately.

Why just hang up? Apparently there have been several instances where the IRS scammers got angry at the people they were trying to victimize and took revenge. They called the police and gave false reports of violent criminal activity, such as reporting an armed home invasion happening at the person’s house. This dangerous, illegal act is known as “swatting,” named for the SWAT teams that respond to the alleged threat, sometimes with deadly force.

So, hang up immediately and report the IRS scam. If you didn’t fall for the scheme, report the call on the TIGTA website: www.tigta.gov. If you did fall prey to the con artists, then call the TIGTA hotline (800-366-4484).

What to Do If You Might Owe Back Taxes

The IRS contacts people by mail about delinquent taxes. They do not start the process by telephoning taxpayers and threatening them with arrest, jail, or forfeiture of their homes. If you are worried about whether you really do owe any taxes, the best thing to do is to go to the IRS website, www.irs.gov, and see if you owe any back taxes. If you do, the IRS will work with you and set up a payment plan. They won’t tell you to go to Walmart to buy prepaid debit cards.

Keep yourself safe from financial predators, including IRS scam artists, by using some common sense. Don’t anger them, but also don’t ignore the situation if you actually do owe taxes. Interest and penalties can add up quickly. You’ll sleep much better at night if you get a payment plan in place and know what to expect.

Your state’s regulations might be different from the general law of this article, so it would be a good idea to talk with an elder law attorney in your area.

References:

AARP. “Meet the Lawman Who Went After IRS Imposters.” (accessed April 11, 2019) https://www.aarp.org/money/scams-fraud/info-2019/timothy-camus-interview.html

 

Widowed? What Happens Next?

A new widow
Newly widowed? It can feel as if you’re in the middle of a tsunami of decisions; take it slowly and accept help.

Becoming a widow or widower after decades of marriage is crushing enough, but then comes a tsunami of decisions about finances and tasks that demand attention, when you are least able to manage it. Even highly successful business owners can find themselves overwhelmed, says The New York Times in the article “You’re a Widow, Now What?”

Most couples tend to divide up tasks, where one handles investments and the other pays the bills.  However, moving from a team effort to a solo one is not easy. For one widow, the task was made even harder by the fact that her husband opted to keep his portfolio in paper certificates, which he kept in his desk. His widow had to hire a financial advisor and a bookkeeper, and it took nearly a year to determine the value of nearly 120 certificates. That was just one of many issues.

She had to settle the affairs of the estate, deal with insurance companies, banks and credit cards that had to be cancelled. Her husband was also a partner in a business, which added another layer of complexity.

She decided to approach the chaos, as if it were a business. She worked on it six to eight hours a day for many months, starting with organizing all the paperwork. That meant a filing system. A grief therapist advised the widow to get up, get dressed as if she was going to work and to make sure she ate regular meals. This often falls by the wayside, when the structure of a life is gone.

This widow opened a consulting business to advise other widows on handling the practical aspects of settling an estate and also wrote a book about it.

A spouse’s death is one of the most emotionally wrenching events in a person’s life. Statistically, women live longer than men, so they are more likely to lose a spouse and have to get their financial lives organized under duress. The loss of a key breadwinner’s income can be a big blow to a widow who has never lived on her own. The tasks come fast and furious, in a terribly emotional time.

You’ll likely be very vulnerable after the death of your long-time spouse. Hold off on any big decisions (like moving, quitting a job, selling the house) and attack your to-do list in stages. Some of a widow’s first tasks will be contacting the Social Security administration, calling the life insurance company, and paying important bills, like utilities and property insurance premiums. If your husband was working, contact his employer for any unpaid salary, accrued vacation days, group life insurance, and retirement plan benefits.

Next, contact an estate planning attorney to make sure your own estate plan is in order. Name your adult children, trusted family members, or friends as agents for your financial and health care power of attorney, and consider creating a revocable living trust. Update your beneficiaries on life insurance and annuity policies. If probate is needed for your spouse’s estate, the estate planning attorney can advise you (many handle probates) or refer you to another lawyer.

Deciding how to take the proceeds from any life insurance policies depends upon your immediate cash needs and whether you can earn more from the payout by investing the lump sum. Make this decision part of your overall financial strategy – ideally with a trusted financial advisor.

Determining a Social Security claiming strategy as a widow comes next. You may be able to increase your benefit, depending on your age and income level. If you wait until your full retirement, you can claim the full survivor benefit, which is 100% of the spouse’s benefit. If you claim it before that time, the amount will be permanently reduced. If you and your spouse are at least 70 at his death, you may benefit by switching to a survivor benefit if your benefit is smaller than his. Your financial advisor or the Social Security office can help you crunch the numbers.

It’ll be quite a while before you feel like you’re on solid ground. If you were working when your spouse died, consider continuing to work to keep yourself out and about in a familiar world. Anything you can do to maintain your old life, like staying in the family home, if finances permit, will help as you go through the grief process.

Reference: The New York Times (April 11, 2019) “You’re a Widow, Now What?”